Bowen seizes chance to make history

Chris Bowen has a book on the coffee table in his Parliament House office. It's the collection of Paul Keating's post-prime ministerial speeches, After Words. The great man has inscribed the book's title page for Bowen, signing off: "I write with faith and hope in your public life."

Anyone who knows Keating will understand that this is more than a casual bit of well-wishing. He's not given to sentimentality, a man quicker to fury than faith. Hope is a word not found on the list of his four-letter favourites. To put both in Bowen is to charge him with a weighty responsibility.

Illustration: John Shakespeare

Bowen, Labor's federal treasury spokesman, carries Keating's mantle. The former prime minister is willing him on to be Labor's next great treasurer. Bowen is well primed.

He studied economics, wrote a book on Australia's 12 most notable treasurers of the past, and served a three-month apprenticeship in the post himself during Kevin Rudd's final, frantic, ill-fated phase as prime minister. And Bowen has made some mistakes that, while they didn't destroy his career, constitute lessons for a future treasurer. He awaits an opportunity.

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Scott Morrison had an opportunity to make history this week. The federal budget that he delivered on Tuesday wasn't a bad one, but it was a missed opportunity. It won't make history.

He had the opportunity to move Australia out of chronic deficit to its first surplus in a decade. That would have been an actual achievement. For the country, as well as for his political party, and for his own legacy. Instead, he announced Australia's 11th consecutive deficit. He promised that he'd deliver a surplus next year, instead.

"Next year in Jerusalem," runs the traditional Jewish expression, an ancient longing for messianic delivery. "Next year in surplus," says Australia's Treasurer. While the country waits, the national debt must be serviced. The taxpayer will pay $14.5 billion next year in interest on the debt in the year ahead, or $40 million a day, according to the budget.

Yes, many countries are deeper in debt. But no country has enjoyed Australia's advantages. A starting point of zero debt just a decade ago; a quarter-century of unbroken growth; and a record-breaking mining boom.

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You don't have to look far to find countries that have done better. A short trip to the east, for instance. New Zealand was hit hard in the global financial crisis, suffered a recession, yet managed to return to surplus years ago - without the benefit of a mining boom.Morrison's is not a dreadfully irresponsible budget. It does hasten the planned return to surplus by a year compared with last year's plan. But, while Morrison exuberantly claims that "we've turned the corner on debt!", the budget didn't move the dial for Australia's sovereign credit rating. None of the big three ratings agencies upgraded their outlook for Australia's rating.Like the jaded Australian voter, the ratings agencies will believe it when they see it. Everyone remembers that the Liberals took power in 2013 sounding the alarm about Australia's "budget emergency".

And everyone knows what happened next. Federal net debt in 2013 was the equivalent of 13.1 per cent of GDP. And now? Morrison's budget predicts it to be 18.4 per cent in the new fiscal year.Those numbers may look small, a blowout equal to a tad over 5 per cent of GDP. But that blow-out is equal in size to the total annual output of one of the world's mid-sized economies, Myanmar or Luxembourg, for example.

With an election due next year, there's a good chance that this week was Morrison's last opportunity to deliver a surplus. History will record that the first postwar treasurer to deliver a surplus was Keating and the last was Peter Costello. Why didn't Morrison take the opportunity?

Because he and his Prime Minister decided that it was more important to try to curry favour - by promising tax cuts, and by giving up the fight to properly fund the National Disability Insurance Scheme through an increase in the Medicare levy.

Net result? "Australia Budget: Politics 1 Economics 0" was the verdict of Canadian-based brokerage TD Securities. Or so it seemed. But within two days, this verdict was as outmoded as the budget itself.

By passing up his opportunity to make history, Morrison handed it to Chris Bowen and his leader, Bill Shorten. Labor spent the last couple of years in preparation for the moment. When it presented, it didn't miss.

Labor's budget reply outwitted the government on the politics and outmanoeuvred the government on the economics. By the time Bill Shorten had finished delivering the response in the House on Thursday night, the verdict on Morrison's budget was "Politics 0 Economics 0".

Chris Bowen has an autographed copy of Paul Keating's speeches on his desk.Credit:AAP

How so? Labor managed to find the money to do three things. First, it has promised a tax cut almost twice as big as the government's for lower and middle income earners, $928 a year against the government's $530.

Second, Labor has promised more spending than the government on hospitals and schools and other outlays.

Third, it has promised to return the budget to a bigger surplus than the government's planned $2.2 billion for 2019-20, although Labor didn't specify just how much bigger. Labor would be "paying-back more of Australia’s national debt, faster", in Shorten's word.

How could it possibly afford to pull off what Shorten called this "winning trifecta"? According to the Labor leader, it's "because we’re not giving $80 billion away to multinationals and the big four banks".

Illustration: Jim Pavlidis

Which is not strictly true. It is true, of course, that Labor is opposed to the remaining unlegislated elements of the government's corporate tax cut plan. That will save a future Labor government some $35 billion, but not in the next few years, the four years covered by the forward estimates. Those savings would only come into play later.

Shorten gave another reason, and this is the real reason Labor can afford the "trifecta" - "because we’ve made the tough decisions to reform our taxation system". Labor's policy to tax family trusts, for instance, would save the Treasury $4 billion over the forward estimates, and its policy to cancel cash refunds for excess dividend imputation credits would save another $10.5 billion.

These are just two of Labor's proposed budget savings, but they're two of the biggest.Rather than slink around as a "small target" opposition just waiting for the government to fall, Labor did the homework, took the bold decisions and prepared itself. When this week's opportunity arose, it was ready.

That's why Shorten was able to stand in the House and promise to grant $5.8 billion more in tax cuts than the government, and still have money left over for more spending and deficit reduction as well.

The government immediately claimed that "Labor's numbers just don't add up". It's possible that this will be proved true by election day. But there is no way that the government can yet know. Labor has not provided enough policy detail on costings and timings to be able to assess accurately. It will need to provide a full and detailed reconciliation before the election.

Treasurer Scott Morrison at the Press Club.Credit:Alex Ellinghausen

But you can be sure that Chris Bowen will not repeat the biggest mistake of his brief and inglorious three months as treasurer under Rudd - he had to go to an election conceding that Labor had a budget shortfall - a funding "black hole" - of $16 billion. That's an election-losing blunder all by itself. If repeated, it would be career-ending for Bowen, too.

The budget reply came just in time for Shorten. The High Court judgment this week on dual citizenship exposed the hollowness of his "rolled gold" assurance that Labor's MPs and senators were all absolutely safe. The budget reply not only gave Shorten something more positive to talk about; it gives him something eminently saleable to campaign on in the byelections to flow from Labor's citizenship debacle.

Labor is likely to hold its seats. History is with it - the last time an opposition lost a seat to a government in a byelection was 1920. But if not, Shorten's leadership likely will come under challenge from Anthony Albanese.

Either way, whether under Shorten or Albanese, Bowen will be ready to seize the opportunity. Voters might not be inclined to believe a Labor promise to cut taxes more and pay down the deficit faster.

But, because Morrison missed the opportunity of this budget, the government won't have anything to counter with, other than promises of its own. Instead of being able to point to an actual surplus, the Coalition will be reduced to trading promises - and accusations - with Labor. This will go a long way to neutralising the economy as a Coalition election asset. Keating would be proud.